* ISS recommends shareholders vote to re-elect all News Corp directors
* Glass Lewis firm recommends against six directors
* Shareholder meeting takes place Oct 16
By Liana B. Baker
Oct 4 (Reuters) - News Corp's controlling Murdoch family received a major endorsement, and won a symbolic victory, with proxy advisory group Institutional Shareholder Services' recommendation that shareholders vote to re-elect the company's board of directors at its annual shareholder meeting.
The approval recommendation is a reversal from ISS' position a year ago, when the UK phone hacking scandal that engulfed News Corp prompted the proxy advisor to urge investors to vote against its directors.
News Corp's annual shareholders meeting is scheduled for Oct 16 in Los Angeles. The ISS report, dated Oct 3, said that shareholders should vote for the company's current directors and expect to see independent action from the board to address any findings, allegations or penalties against the company when the phone hacking investigations conclude.
A News Corp spokesman said in a statement it is "pleased that ISS supports the election of our full slate of director nominees," and that the report "affirms New Corporation's strong performance this past year."
However, another prominent proxy firm, Glass Lewis, recommended on Thursday that their clients vote against six directors including James and Lachlan Murdoch. The firm cited concerns over having too many members of the Murdoch family on the board and pointed to the large amount of shareholders who voted against Murdoch's sons last year.
News Corp said it "strongly disagrees" with Glass Lewis' recommendations and that it has made "great strides" in terms of corporate governance and shareholder value, according to a spokesman.
Shares of News Corp are up about 60 percent compared to a year ago. Its shares rose 0.8 percent, or 21 cents, to $24.897 in mid-afternoon trading Thursday.
Last year, following the hacking scandal at the tabloid News of the World and the subsequent legal fallout, which included investigations by various UK regulators and numerous appearances by Rupert and James before Parliament, ISS recommended that News Corp shareholders vote against almost all of its directors.
News Corp's 14 board of directors include Chairman Rupert Murdoch, and his sons James and Lachlan as well as other executives such as president and chief operating officer, Chase Carey, and former assistant attorney general Viet Dinh, who spearheaded internal investigations of the hacking scandal. New additions added to the board up for election this year are Elaine Chao, former U.S. labor secretary and former Colombia Prime Minister Alvaro Uribe.
Though Rupert Murdoch deflected attempts by angry investors to remove him as chairman, about 29 percent of investors, excluding his family, voted against Murdoch. James and Lachlan fared worse, with about 35 percent of shareholders voting against their re-election to the board. The Murdochs cleared the hurdle and were reelected because they control 40 percent of the voting rights.
Despite its approval recommendation this year, ISS did highlight some concerns it had over the hacking scandal, mostly related to costs. It recommends voting against ratifying executive compensation and said "shareholders may be concerned" that some of the company's profit was adjusted by $224 million in 2012 due to costs related to hacking investigations.
ISS added that the hacking scandal could incur costs for years to come and that News Corp executive should stay accountable with regard to its financial impact on the company.
News Corp said in September it was cutting bonuses in half for its top executives, including Rupert and James Murdoch.
After years of resistance, Murdoch relented to pressure from investors to split up News Corp's newspapers and publishing assets from its faster growing entertainment assets. The division is aimed at boosting the value of its entertainment side, which was being discounted because of its association with the struggling newspaper business. The split is expected to be completed in 2013.